If boring means getting digital innovation right and driving up share price for stockholders, Chipotle should be happy with the label.
— Erika Adams
Brian Niccol has stabilized Chipotle Mexican Grill Inc. since taking over a year ago. Now, he faces a trickier challenge: Restoring some of the burrito chain’s foodie cachet while simultaneously fueling ambitious growth.
Niccol, who took over from founder Steve Ells last March, has cleaned up Chipotle’s operations and tapped the fast-food playbook he learned while running Taco Bell. That includes propelling sales with digital orders and deliveries while adding customer-luring menu items like quesadillas.
“We have to remind people why they fell in love with the brand, and why they will continue to stay in love with what Chipotle can do,” Niccol said in an interview about his first year at the company and his outlook going forward.
Under Niccol’s guidance, Chipotle has steadily recaptured same-store sales growth — a key gauge of success for restaurant chains and retailers. Investors, including activist Bill Ackman, have applauded, with Chipotle’s stock doubling over the last year. It’s currently approaching the price where it traded before a food-safety crisis engulfed the chain in late 2015.
“Brian and his team have done an incredible job transforming Chipotle,” Ackman said in response to questions about Niccol’s performance. “We could not be more enthusiastic about the progress to date and the future potential to be realized thanks to his leadership.”
Niccol now wants to double the number of Chipotle restaurants in the U.S. and is looking abroad to expand the company’s limited international footprint.
Former chief Ells, a trained chef with culinary aspirations, was credited with creating a fast-food chain that had captured the discerning stomachs of millennials. But serving fresh food soon became a liability, with an E. coli outbreak setting off a food-safety crisis that exposed flaws in the company’s protocols and operations. Ultimately, hundreds got sick, customers fled to rivals, and the company’s market capitalization plunged by more than $16 billion in the three years through Feb. 13, 2018, shortly before Niccol took over.
His turnaround has focused on a lot of the somewhat mundane details of running a restaurant — ensuring forks are stocked, for example. He also hired operations experts at headquarters to improve cooking and safety procedures and oversee new restaurants that are opening across the U.S. To make sure sick employees don’t come to work — a problem for the chain in the past — Chipotle has set up and expanded a new hotline staffed by nurses.
Speed is another area of focus. While Chipotle was founded on quick service, with its simple menu meant to move customers briskly through the line even during peak times, execution has slipped in recent years. Restaurants now churn out about 20 orders every 15 minutes, on average. That’s down from about 35 per 15 minutes before the company’s food-safety crisis took hold. That’s because turnover has been high and employees needed better training, Niccol said.
“The company just lost focus and wasn’t executing,” Niccol said. “Sometimes the growth gets ahead of the organization and the capability and you don’t realize it until it’s too late.”
He has also gone back to the chain’s original message: Food With Integrity. It’s running new television ads, including one that shows an employee making guacamole using “real ingredients.” The menu now features buzzy words like keto, paleo and plant-powered — a bid to capitalize on eating trends.
With an eye towards growth abroad, Chipotle has hired directors for both Canada and Europe for expansion in those markets, Niccol said. Eventually, the company will pursue “other compelling” regions like Asia, the Middle East and Brazil, he added.
Now, investors’ focus will turn to whether Niccol can maintain the momentum. It won’t be easy — even adding something as simple as a quesadilla has proven challenging. The new item is a top request from customers, but Chipotle hasn’t been able to quite get it right because they’re slow to make and require new equipment. Still, they’re spreading slowly but surely: The quesadilla trial will expand to more than 100 locations later this spring.
In some ways, Niccol’s first year was all about making Chipotle boring. That’s meant keeping the company away from negative headlines and focusing on the day-to-day execution of running a safe and reliable fast-casual chain. As those efforts take hold, the company may turn its attention to generating the kind of growth-fueling buzz that restaurants crave.
That likely means introducing new foods and taking a stand on social issues, according to Bill Chidley, a partner at ChangeUp, a branding and retail design agency.
“They’re going to have to do something that keeps them relevant in the news,” Chidley said. “They need to keep their foot on the gas to make sure they’re not just going to get tired.”
Niccol said Chipotle is taking steps in that direction. A key advantage, he added, is that young diners already love Chipotle and view it as a “new” restaurant.
“The brand is arguably one of the most relevant brands out there when it comes to driving food culture and how people want to eat and how they will eat in the future,” he said. “We’re in the early days really of leveraging that.”
— With assistance from David Westin and Scott Deveau.
©2019 Bloomberg L.P.
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